Published Online: April 8, 2010

Districts Report Grim Outlook as Stimulus Fades

School districts across the country are warning of widespread layoffs and severe cutbacks in programs as funding under the federal economic-stimulus package begins to dry up, according to a reportRequires Adobe Acrobat Reader released Thursday by the American Association of School Administrators.

The infusion of up to $100 billion in education aid under the American Recovery and Reinvestment Act, which passed Congress last year, clearly helped districts avert personnel reductions, the report concludes. But many districts are facing a bleak fiscal picture as that aid starts to run out later this year, despite signs of improvement in the overall economy.

“The cessation of ARRA dollars, paired with the continued budget strains at the state and local levels, … represents a one-two punch to education funding that will further insulate schools from economic recovery,” the report says, “and will likely translate into more budget cuts, more job cuts, and fewer resources for programs and personnel.”

The findings are based on surveys of 453 school superintendents and other district-level officials from 45 states, the most recent conducted last month. Increasingly, districts are looking to layoffs, staff furloughs, benefit cuts, and other measures to fill gaping budget holes in the coming school year.

And district officials surveyed are concerned about the Obama administration’s proposals to increase competitive-grant aid during an economic downturn, as unveiled in the president’s fiscal 2011 budget request, while largely level-funding formula grants, a more reliable source of funding.

Most districts surveyed—87 percent—also said that they did not see an actual funding boost from the recovery act, in part because many states cut their own education funding contributions, diverted money to other purposes, and then used ARRA dollars to backfill K-12 cuts. That “shell game,” as the report calls it, was not explicitly prohibited under the stimulus law.

Now, districts are facing the end of the stimulus flow—a turn of events widely known as the “funding cliff”—and many are bracing for drastic action. For instance, 90 percent of those surveyed expect personnel cutbacks in the 2010-11 school year, on the heels of a year in which 68 percent of those surveyed slashed positions.

Districts also are reducing employee benefit packages. Forty-six percent of those surveyed said they planned to trim health-care benefits in 2010-11, compared with 12 percent in 2009-10. And 20 percent of those surveyed said they would consider reducing pension contributions in 2010-11, as opposed to 3 percent in 2009-10.

More than a third of those surveyed, or 34 percent, said they were contemplating personnel furloughs during the 2010-11 school year. Twelve percent of districts implemented furloughs in 2009-10.

Classroom Impact

Schools also are increasing class sizes as a result of budget pressures. About 62 percent of districts surveyed said their classrooms would be more crowded in the 2010-11 academic year, up from 26 percent in the current school year and 9 percent in 2008-09.

Schools are also contemplating cuts that could affect learning-time. About a third of those surveyed said they were considering eliminating summer school programs, up from just 14 percent in the 2008-09 school year. And 13 percent of schools are mulling a four-day school week, up from just 2 percent in 2009-10 and 2008-09.

District officials are concerned about long-term implications of a federal shift in funding policy that would funnel increases more toward competitive grants than toward formula-grant programs.

For example, Title I grants to districts, which are aimed at helping disadvantaged students, are financed at $14.5 billion in fiscal 2010 and would receive the same in the president’s proposed fiscal 2011 budget. Special education would receive $12.5 billion in fiscal 2011, a 2 percent increase over fiscal 2010.

While noting their importance as a source of federal funding, the report also says that “competitive grants represent budget instability and are unlikely to be considered for the very long-term innovation and reform the Obama administration is hoping to spur.”

It goes on to say, “Financially strapped school districts across the nation were clear in reporting that they do not have the capacity to complete a competitive grant [application], and many would have to use resources to hire outside consultants.” That is particularly true in small, rural districts, the report found.

Faced with similar criticism from lawmakers on Capitol Hill, U.S. Secretary of Education Arne Duncan has noted that the proposed 2011 budget would keep funding for Title I and special education level, and that the administration is proposing $3 billion in new competitive-grant funding aimed at spurring education redesign and innovation.

Noelle M. Ellerson, a policy analyst at the AASA and the author of the report, said the findings underscore the importance of continued congressional action. The House of Representatives last year passed legislation that would provide $23 billion to help thwart cuts in education jobs. The Senate has not yet crafted a similar bill.

“This survey clearly illustrates a need for additional emergency funding for schools,” Ms. Ellerson said. And she said any new measures should include language prohibiting states from using federal dollars to supplant their own efforts in education.

Vol. 29, Issue 29

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